Clothing retailer Ralph Lauren (RL) has issued second-quarter financial results that topped Wall Street’s forecasts.
The New York City-based company known for its polo shirts reported earnings per share (EPS) of $2.70 U.S., which was above the $2.48 U.S. consensus forecast of analysts. The profit was up 15% from a year earlier.
Revenue of $1.50 billion U.S. was in line with Wall Street expectations. Sales growth was driven by a 6% year-over-year increase in Europe and a 4% gain in Asia.
The strong results were attributed to several factors, including cost controls with lower marketing spending, and a 1.7 percentage point increase in gross margins due to lower cotton prices and sales of higher-margin clothing items.
Ralph Lauren’s Q2 results also got a boost from the fact that the company is the official outfitter of the U.S. Olympic team that is competing in Paris, France.
Despite the strong Q2 numbers, Ralph Lauren’s stock dipped 3% after management warned that unfavorable foreign exchange rates could negatively impact revenue moving forward.
Most of the foreign exchange headwinds stem from Ralph Lauren’s business in Asia, particularly Japan, where the Yen currency has weakened against the U.S. dollar.
In terms of guidance, Ralph Lauren said that it expects revenue will increase by a low-single-digit percentage in constant currency this year. Analysts had expected an increase of 2.4%.
Gross margins are forecast to increase 0.5 to 1 percentage point in constant currency during the remainder of 2024.
The stock of Ralph Lauren has risen 23% over the last 12 months to trade at $159.39 U.S. per share.
